Regulatory disharmony keeps FDI at bay

Macroeconomic policy experts suggested urgent government action for striking a close coordination among so many authorities involved with spadework for foreign direct investment (FDI) in the country.
In fact, a disharmony keeps upcoming FDI at bay, they said.
Such views were aired at a seminar on 'Macroeconomic Policy Convergence', arranged Sunday by the state-run Board of Investment (BoI) to discuss macroeconomic policy priorities of the day.
In absence of a widely encompassing law on investment, such foreign investments are regulated by a number of laws most of which are quasi-regulatory and ambiguous, said Mohammad Yunus, senior research fellow of the Bangladesh Institute of Development Studies (BIDS), in his keynote paper presented at the meet.
Bangladesh Bank chief economist Biru Paksha Paul also found lack of policy coordination hindering inflows of FDI and stressed the need for synchronising the policies to attract more investment into the country.
At present the FDI inflow to Bangladesh remained as low as 1.0 per cent of GDP, prompting the call for quick improvement of the investment climate.
"Coordination is big challenge for FDI," said Mr Biru Paksha.
The central bank chief economist cited a glaring example of how policy cacophony makes big-name foreign investors to shy away.
For a lack of coordination, he told the audience, the country lost Korean company Samsung's investment worth about US$5 billion even after a long negotiation.
Industries Minister Amir Hossain Amu, who attended the programme as chief guest, however, said FDI inflows are on the increase due to adopting investment-and industry-friendly policies by the present government.
"The country received US$1.6 billion in FDI last year (2014)--up 24 per cent from the previous year," he told the seminar at the BIAM auditorium.
The minister expects more in the current year.
Presided over by BoI Executive Chairman SA Samad, the programme was also addressed, among others, by Prime Minister's Power and Energy Adviser Dr Tawfiq-e-Elahi Chowdhury and NBR member Farid Uddin.
A large number of businesspersons, representatives from various government and non-governmental organisations, and trade and chamber bodies, academics and researchers attended the function.
Citing situation of western countries, especially the USA and Europe, which are struggling hard to overcome economic meltdown, Dr Tawfiq-e-Elahi said Bangladesh is progressing well, growing fast by the way.
"Presently, about 70 per cent of our population have access to electricity as against 45 per cent in 2009," he said.
The PM adviser is expecting cent-per cent access to electricity by the year 2021.
Replying queries from the audience, the Bangladesh Bank economist, Biru Paksha, also highlighted the urgency of cutbacks on bank interest rates.
He attributed high interests to the accumulation non-performing loans and lavish expenditure by the banks.
The BB economist hinted that high rates of interest on saving instruments would be cut down considering the overall situation.
"Interests on our saving certificates are too high. If the rates continue, investments in saving certificates will increase further, which will make investment shy away from the country's capital market," he said.
About high foreign-exchange reserves, he said it's not very high but prudent and can cover six moths' import bills. "Shortage of foreign-currency reserves creates huge crisis," he said to explain, citing for an example that China keeps reserves high to cover 19 months' bills.
National Board of Revenue (NBR) member Farid Uddin said about 25 per cent businessmen avoid paying taxes by various means.
He said the government is working hard to reform the revenue board. Once it is completed, the board will be more useful which will help increase revenue collection.
He pointed out that the government has reduced tax on capital machinery, raw materials and intermediate goods substantially and is trying to cut down corporate tax.
"Every year the NBR tries to reduce tariffs. This year we also received some 600 proposals," said the board member, adding that the new VAT act will take effect from 1 July 2015.
    mzrbd@yahoo.com